As the year comes to a close, you may be considering charitable gifting. With so many mechanisms to do so, it is necessary to plan ahead. Start by deciding who will receive your donation. We are here to help with the what, how, and when of charitable giving.
Although using cash is the simple and straightforward method for gifting, it may be advantageous to consider your options before writing that check. For example, if you were to liquidate securities in order to raise cash for the donation, you would be responsible for paying taxes on the possible gains associated with the sale. Any capital gain would negate a substantial portion of the tax benefits of charitable giving. A more tax sensitive alternative could be to donate securities (which have been held for at least one year) directly to the charitable organization without liquidating them first. If you choose this option, you will receive a deduction based on the fair market value of the securities at the time of giving. Since 501(c)(3) charities are tax-exempt, neither you nor the receiving organization will be liable to pay taxes on the investment gains.
Another tool you can use is a donor-advised fund. A donor-advised fund enables you to make a charitable gift in the current tax year without needing to immediately specify the recipients. This is useful if you want to take a deduction on your 2015 tax return but need time to choose which charities will receive your gift or you want to make a large charitable contribution in one year and spread the donations over a longer period. Unlike private foundations, donor-advised funds do not have yearly minimum distribution requirements. This flexibility allows you to contemplate who will receive your donation without rushing to a decision.
The deadline to donate to charity or contribute to a donor-advised fund and receive a deduction on your 2015 tax return is December 31st, 2015. However, year-end is a busy time for your custodian (Schwab, Fidelity, or TD Ameritrade) and they request additional time to process your charitable gift. If you would like to donate to a charity or donor advised fund this year, please have your requests to your Coldstream team by the second week of December.
If you are interested in charitable giving or would like assistance in creating a donor advised fund, please contact your Coldstream relationship manager or client service team for guidance.
BY BRIAN PLOWMAN, Private Client Services Administrator